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tv   Bloomberg West  Bloomberg  September 27, 2014 4:00am-5:01am EDT

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[captioning made possible by loomberg television] > from peer p in san francisco welcome. we focus on innovation and technology. every weekend we will bring you the best of west, the top terviews with the prower players. to our lead, apple is supposed to be shining brightly after it
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sold a record 10 million new i phones over the opening weekend but the shine is starting to come off a bit due to some technical problems which have caused headache after headache. apple had to pull its update after some customers couldn't make calls. a new report says aps are crashing. 67% more often than the previous version. and it had to be dropped from the rollout due to a bug adding to the procks users complaining that the new i phones bends when iting tight i will in your pocket. this showing an i phone 6 plus getting, well, bent. but apple is fighting back say the phones go through rigorous testing and meet very high standards. so how serious are the problems for apple? i spoke with our editor at large. the senior research analyst, and the man behind that video who also just tested an i phone
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6. i started by asking him what exactly happened when he tested the 6 compared to the 6 plus. >> the six did much better as i expected it would the fact that it has a smaller form factor. i put as much pressure as i could in the same location and attempted to bend it in the same fashion. d i meep, it kind of had a tiny little bend but nothing significant and completely useable. so at this point, i'm willing to say based on that little piece of evidence that the 6 is going to be probably a little bit more durable than the 6 plus. >> you also compared it to a few other phones. >> verage i did. >> how do they stack up? >> even with the standard i phone i could feel that there was a tiny bit of pliblet, like it sort of seemed like it would probably give away sooner than some of the other devices that
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i tested. the most impressive is this one here, which is the new moto x, and i especially wasn't able to get any kind of creeking or cracking, twisting, bending, nothing out of it. i can actually reply kate that right here. this phone is u just solid and i actually didn't know that when i first received it because these tests weren't really even a thing at that point. ut the moto x as well as the other very popular phone did really well in a similar test. >> all right. how big a problem? let's start with the bending because there are a few problems happening right now how big a problem is the bending? >> i think it's topcal today but ultimately it will blow over. and if people just use the fobe reasonably, i don't think it's going to cause any significant change in the overall demand. but let's assume that it is a
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big problem just for the sake of argument. of timated that about 30% the i phone use are going to be the 6 plus. so i think when you put it in the context of the mix between the two, it's really isn't much of a problem. and the software problem is something that gets fixed over time. >> let me explain why you're wrong. but here's why i think this matters. the essential brand argument of apple is you don't have to be an expert, you don't have to know how to cral-at-delete. these are simple devices, crill devices. you don't have to worry about the updates, downloads. this is apple. and i wonder if a series of problems in both hashedware and software start to erode the brand value itself.
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>> i think that if they don't get the software issues fixed, in the past they do have new software hick cups. for example, when the last i phone came up there was the touch id which had some problems. so i think the concept isn't anything unique. and there's been issues that have drained power faster. so if i they don't get this tightened up that could potentially be a bigger problem but i think there is a window that people will give them the benefit of dot doubt. >> z is it bigger or smaller because so many people are eligible for upgrades and phone shopping literally right now? >> i think it gets definitely magnified and there's just no place for apple to hide when you're selling 10 million units over a short period. this stuff is going to come out. but it's just part of developing hardware and software you go through these factors. but if they can get the batches fixed in a month people aren't
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going to be talking about this. >> what do you recommend to users right now? millions of people have watched your video. people care about this. >> the real time analytics that i'm looking at show 16 million views in the last 24 hours. so they haven't updated the public figure yet. >> ufede more views than -- you've had more views than i phones sold? >> it's still accumulating close to 1 million views every hour. so this is something that people are interested in, whether they're i phone owners or not this is an incredibly high profile company and an incredibly high profile product and people want to know about these devices intimately. i suppose that's what videos like this provide. is this going to be a real issue that everybody has that your neighbor has and family members have?
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probably p not but it doesn't mean -- it doesn't mean that it isn't useful information. people always want to buy things that are overoongneered, that are tougher and stronger than they need to be. so when i tried the same test my impression of the moto x changed immediately when i saw it didn't do anything similar to what the 6 plus did. so part of the pride of ownership comes through recognizing how robust the device that you have purchased is and the fact that the other models from other brands fared so much better is meaningful to me. >> earlier, john the ceo challenged everyone to try to bend the new blackberry pass port and he grabbed it on the set and tried to do it himself. luckily he was not successful. i don't know if that means the stronger or e is
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he is weaker than you. >> i think he needs to hit the gym. >> the pass ports are thicker, fatter. the tough every thing is that emily didn't care if i grabbed the passport. >> i cared. i almost had a heart attack. >> i thought you were more defensive of your i phone. i think that's the way people have this attraction to the phone, they have this real intimate relationship with the i phone. >> it's my primary device. i use the blackberry for more business things. but really, gene, added altogether, what do you recommend for users? >> i think you have to make your decision. at the end of the day i think you're going to probably feel like the bigger phone, even with the issues, the 6 plus is probably a great phone. > coming up, more on blackberry's new phone, the
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passport. i speak with john when about whether the square screened boddle aimed toward business customers can turn blackberry around. that is next.
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>> how many of these square screen phones can blackberry sell? can it really help turn around the struggling company? i spoke with when and started by asking him why he opted for
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the square design. >> because we talked to the customers and they look at how they use the device and for productivity and looking at the new style aps, looking at the vertical aps and health care aps, we figure that the wider and more one to one aspect ratio is what everybody will need for achieving more. so that's how we came up with it. >> what's your goal for this phone? how many do you think you'll sell? >> i am not disclosing it right now but we expect it to be successful. but the market will tell me that. we have various different ideas that we could kind of use as a mother-daughter type approach. so we'll, we're going to have to gauge the market price. so far seems to be pretty good. >> let's talk about the market. you and i have talked about market share. they're saying global shipments
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are lower than 1% and by 2018 market share will be 0.3%. where do you think it will be? >> my job so to make sure that doesn't happen. so i think we have a good plan, we have a good set of portfolios. despite everything we've gone through, this is the third phone that we released this year and there was also one coming out in a couple of months called a classic and so we started out with the z-3 in may and now it is in the 13 countries and seems to be received quite well. then we just announced the porsche designed phone and on september 17, and now we're doing it obviously here in toronto myself and my colleagues in dubai and london releasing that phone. so things are, i think we can pick up the pace and we should be gaining market share as we
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move forward. >> your job is to also make sure the phone doesn't bend. you took a little jab at apple saying you challenge us to bend the passport. what do you think of these report that is the i phone can bend? i've seen it happen in a video. >> i have no idea. i just read before i came here this morning and i thought it was a little amusing. you know me, i cracked that as in good humor and not to mean to be mean to anybody but on the other hand our passport is extremely well-built. and i would -- it's somewhat of a challenge but you have to do it the same way, put it in your pocket and then see whether it bends or not. i doubt it would happen. >> seriously, does this pass the bend test? did you test this for bend sng >> we do a lot of mechanical
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testing. i don't know whether we particularly do the bending itself. but we actually here showcase the kind of five layer of the phone including the antenna layer which is a complete steel frame around the inside the phone. little g that needs a effort. >> what do you think of the new i phones and the apple watch? >> what do i think? i really don't know enough. i've been so busy i don't know enough how to comment on that. obviously they have their audience and i'm hoping to go after my audience, which is about the people who strongly need productivity and this phone should appeal to them. >> one thing you do know is that the president is also addicted to his blackberry. did you send him a passport to test out? >> i don't think we gave it to the white house yet. i don't know. i could be wrong.
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but i would love to have president obama use it. a lot of the heads of state use the blackberry with extra security and this will continue on. >> how about this, blackberry shares are up almost 70% since you took over. so investors are coupting on you. you said that blackberry will be profitable by 2016. what's the time line now? any likelihood you can do it sooner? >> i told people we're very profitable in fiscal year 2016. so sometime in 2015 calendar, and i'm still standing by it, depending on the resept tivity of all these phones and the classics coming out in about two months, our software releases next month, i'm expecting to see some growth next year. so with that, if i could get some growth on the top line, i would be able to make it profitable sooner.
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>> my interview with blackberry ceo john when. how will apple pay to work with major credit companies? and when is chip and pin technology going to be mainstream? we put those questions to visa's chief officer next.
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>> welcome back to the best of bloomberg west. one feature the millions of new i phone owners will use next month is apple pay will allow users to wave their i phones or watches in front of a reader to
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make a purchase. mastercard and are official parptners. this is just starting to penetrate the united states. so what does visa think about all these technologies? cory and i spoke with visa's chief enterprise risk officer. i started by asking her swrust how apple pay exactly works. >> the way it works is you provision your card on to an apple phone very simply by taking a photo of it. in the background visa technology working with your bank that issues the card will verify that it is really you. once you've done that very simple step all happens in the background. when you come into the store you can simply wave the phone after pressing your if i cannerprint reader on the phone and it will make the payment for u you. >> from a risk perspective, obviously we've seen major credit card breaches at target and home depot. had apple pay been more main streemed will that have
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happened? >> we say insecurity can never solve the problem because we have very enterprising criminals attacking our system every day. but am pay and sim -- apple pays and similar technologies will be a big part of the solution along with those new chip cards that you mentioned. >> specifically about these technologies, does visa have more cards using this technology than say using different wallet formats? >> well, right now most of our payments in the u.s., as i'm sure you know, are taking place on plastic cards. so the mobile technologies are relatively new. we think they will be taking off. but right now the overwhelming majority is on your plastic cards which are going to be swapped out for those new chip cards over the next two or three years. >> how fast will you actually be swapping them out at visa? >> great question. that's just what i was about to tell u you.
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visa itself doesn't put the cards out. it's our issuing bank partner. so whatever bank issues your card. they have told us that by the end of 2015 we should have 575 million chip cards in the u.s. market, huge numbers. >> specifically, do you think that the vali proposition is different because they've got biometric i din d on the device so therefore they will have a lot less risk? >> i think the proposition is really a strong one from a security position point of vufmente but it isn't really about the finger print so much as the technology that operates in the background. and that includes chip technology which generates a one-time code, can't be replicate bid a criminal. so it really makes the data useless to criminals and will be a big part of devaluing the data and making the system a lot safer in the future. exactly the same thing as those chip cards do. >> i don't understand the
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fundamental difference here. >> right now today when you use your plastic card the store reader will read the card and it will have a series of numbers that could be used to make a fake card. that's why they're stealing the data from places like target and home depot. but once you have a one-time code it won't matter whether that data is ever stolen because you can't use it without a new one-time code generated by that little chip either in the card or the phone. >> so in other words what you're saying is the retailer never has that cashe of credit card numbers so hackers can break into target and home depot all they want. there's nothing in there. >> essentially correct. that's why we say these can take the retail indstri out of harm's way from criminals trying to steal data. >> the technology that's integrated, that's different from chip and pin technology.
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how do you see these working together? is this adding layers of security to the actual transaction? >> yes. it's adding layers of security to all the transactions. so it's important to know that in security the criminals will always go to the weakest link. so you have to secure the physical point of sail where you're going to use your card in the terminal physically and also the digital point of sale, whether mobile or electronic. the technology will be operateded on much the same principal but its implemented differently depending whether you're there with your card or transacting remotely. >> you mentioned that visa is going to have 575 million chip and pin cards out there by the end of next year. will retailers have the hardware to accept these cards? >> the retailers are coming along perhaps a little more slowly. they have to take the trouble to swap out their terminals.
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they've done a lot of that work already. so many are upgrading their systems. we expect there will be significant numbers but some of the industry guru are projecting up to 30% of all payments will be chip on chip. chip card meets chip terminal by the end of 2015. so that's quite a lot. >> so to explain why the processing business is so hot right now. if i were apple i would is be saying to you visa i don't care. the thumb print is reducing your risk and therefore we should get a piece of the transaction. explain to me why the thumb print biometric is not reducing risk. >> well, let me start with the tokenization piece. it's what makes that data useless by creating a single digital account number similar to the one time code on the chip card. so that is what is really reducing the risk. the thumb print is a great thing.
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don't get me wrong. but it is what we call static data. it doesn't change from use to use. so in theory our ingenius criminal minds could be able to counter fit that phoneprint data as we will. it is good but it's the combination of things that make it work and especially the -- eliminating the static data. >> as i understand it apple is taking a portion of bank fees but it's not taking anything from the credit card companies. does your take away change? is apple taking any part of your cut? >> apple's arrangements are primarily directly with those financial institutions and the economics for visa doesn't change. > risk officer for visa. pulls out due to differses over climate change and other tech companies are following suit. we've got the latest on the
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growing controversy coming up next.
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>> innovation, tech noming and the future of business. eric has admitted that it was sort of a mistake to give film support to alec which opposes u.s. action on climate change. we spoke with forecast the facts campaign director. that organization has led a campaign against alec over climate change. i started by asking olson if he
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is satisfied with googled move? >> it's certainly a step in the right direction. i think submitted said this was the wrong thing. alec was not aligned with the company's values nor that of their users so we're very encouraged. >> it makes sense to me that the koch brothers support alec. it makes sense to me that exxon mobile supports alec. it doesn't make sense to me that google is getting involved in funding a group that's opposing understanding about climate change. why is google involved? >> that's a great question for google. >> what do you think? you've been insisting that they end that relationship. >> alec is very active in state houses around the country. to the extent you are a country that wants to have interest in state houses alec is an organization you would probably think about. the problem of course from our perspective is why google and alec may align on tax policy or
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immigration policy -- rel, not immigration policy. trade or other types of things they're fundamentally at odds. the good news from google is they placed climate change high enough on their list of priorities that they disaffiliated from this group. >> i have a statement. how do you respond that? >> it's more lies franksly. the american legislative exchange counsel has not been shy about their position on climate change. look back at a draft legislation proposed in 2009 suggested teaching climate change as a theory in schools around the country. that is not about free market. that's about misinformation. climate change is a fact, real, happening now, and google recognizings that.
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>> does this go beyond lec? are there other things that google is doing to support climate change deniers? >> so goodle as well as a number of other companies, are very heavily invested in their political contribute yps in washington, d.c. so google for example contributed almost $700,000 to climate change deniers in the white house -- excuse me, in congress, since 2008. so there's additional steps that need to be taken. smid was very deleer that the company has a view. it should make sure that its political contributions align with that view. >> google gave us a statement. we're also learning now that
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facebook and yell p have pulled out of alick as well. up next, the private space race taking off with space x winning a big nasa contract and blue origin signing a new rocket project. which tech titan may come out n top.
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>> welcome back to the best of bloomberg west. well, space x may have thrown the latest mission tolt space station. it may soon be challenged by another tech titan. blue origin backed by amazon said its tart anywhering to develop -- partnering. we spoke with the former commander of the international space station starting by
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asking him who will win the race to space? >> i think it's a really good set of circumstances right now. what we need more than anything else are better engines. we are so limited by our engines technology, trying to safely get to space and then try to get even further out into the universe. we've been making small modifications to existing engines. that's what the funding from nasa is helping to pay for that is better engines. so i'm really excited about that some of the best are putting their efforts into trying to solve that problem. >> but there are also huge competitors. can you explain who is doing what and who might be doing what better? >> sure. the engine that jeff and his blue origins group are working on in partnership with the united launch alliance, they're look at cutting their reliance on a russian engine that we've
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been partnering and subcontract and using for several years. looking to have an american made next generation rocket engine and jeff has brilliant people working for them so they're really working on that piece. space x not only built a new rocket ship but building new space ships as well. that is sort of like the one you just mentioned. they're kind of a complete services company. but what he is looking at is ow to make a launch rocket reuseable, after its spin off to come around and land again. if he can do that he will cut the cost by a factor of 10, maybe 100. so they're heading down slightly different paths. but they're taking us where we want to go. those are two great competitors. >> with boeing and lockheed martin working together, talking to me about what that
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means in terms of opening up the sort of idea sharing between all of these, now four of these companies, really. >> well, the real difference is the past nasa has sort of told the rocket companies what to built and then they built it for them. in this case what we're doing is saying this is the product that we want. you can build it any way you want. sort of the difference between having your own fleet of cars and renting your car. so that allows a lot of freedom of design. and we've got a couple different camps competing which i think is a good idea and i think the way they've done it is smart and good for the nation. hopefully coming out of both will not end up with just one winner but will come up with two different ways to get to the station. since the shuttle we only have one way to get people to and from the space station. which is never a good thing.
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>> in your experience having worked with space x and the draggle capsule in space, are there any concerns about working with a third party, anything related to safety perhaps that's different than just nasa? >> when i sat on top of the rocket ship you are counting on tens of thousands of people that you have never met and little companies that help build all the parts. that's why you need a really good strict set of rules. you knee oversight, you need to have a very strict set of requirements and then you need to make sure that the vehicle you are riding is tested properly. so there's always that concern. test pilots aren't passengers nd as nauts aren't passengers. >> former international space station commander chris hatfield. boeing could be bringing new drones to the high seas. why one of the world's biggest
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defense contractors is teaming up with an ocean robot maker next.
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>> welcome back to the best of bloomberg west. it's not just the skies. the ocean could also be another front tier for drones. boeing just announced that it's teaming up with liquid robotic which is makes underwater drones which collect information about ocean conditions. the companies will work together to develop new products focused on anti-submarine warfare and marine surveillance. we spoke with gary guisen. i started by asking him how does the partnership work? >> we've been working in the defense face for quite a while. wave powered and solar powered platform, you can put any sensor on it.
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we can detect surface ships, submarines. so the partnership with boeing is just a natural extension of the number one defense contractor on a global basis. so part nerg with the top player in the defense industry is just a huge company-making event. >> are you sharing technology? >> absolutely. >> what kind? >> we make the drone that runs on the surface. boeing also makes undersea drones, aerial companies, a company called insitu and they make aircraft of course. that have been modified to work in a military context to hunt for submarines, to do surveillance and that sort of thing. >> obviously deep connections. is that the principle driver for you? >> it's two things. that's a big thing. because we're startup company they've got reach that we would never have. but the vision they have is to connect all of these assets in an unmanned way from sea floor
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to space. so they play in satellites, they have aircraft, aerial drones, underwater drones, nothing on the surface. >> at the moment what kind of drones are more advanced? air drones or underwater drones? >> you will have to say aerial. they've, the cannottation is sometimes is negative because they're dropping bombs. but drones are here and pervasive and all over the place. you have the goodle car, consumers flying quad copters. we make an ocean drone, it listens well for things we aren't armed or weaponized. we are gathering information we can supply to other people. >> what are you talking about? >> surface vessel detection. that's a big one. there's a lot of illegal fishing, human trafficking, drug running. so we can detect what kind of
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ship it is. what is it? we can also detect things you should wear. submarines is a big thing and with russia rearming their fleet, chinese submarines, iranian submarines, it's a hot topic to figure out where all the submarines are. >> how big a focus is this right now? >> it's a huge focus. there was something which was on the c floor which was acoustic sensing and it's pretty much inoperable. >> why? >> it lan wished. after the cold war there wasn't need to keep investing. but now ant submare warfare is a big deal. >> how do other countries' technology stack up to ours or yours? does it just do russia and china have the same thing? >> we're way ahead. for ant submarine warfare spend, it's a $19 billion spend.
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just to put it in perspective. so the dominant share building that technology to track them were far and away ahead of the market. >> what has the interest, how has that impacted your business? the fascination of drones have grown. >> it helps. drones are here unmanned things are being created for a reason. in our case the ocean is a dangerous place. the waves are huge. it's expensive to put a ship out in mid ocean. we can patrol and do things in a very cost effective way. hat's similar to delivery. so you're going to see drones. they're here. they're being developped in all different markets and i think that's going to be a big part f our lives. now to drones in the air. google wants to test them in new mexico. these would reportedly deliver
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internet service to remote areas. i spoke about the potential and k cave venture. >> it's really fascinating. you've seen google earlier talk about this project which is the idea of using balloons to create a mesh fackric and this is sort of the natural next step. the problem is with drones in particular hot air balloons ave this wonderful property to stay up. we haven't done very well so far in terms of creating long lasting drones. i'm a little hard pressed to see how you create even a quasi permanent factor. >> it's a long term project. but project loom we haven't heard much about how that balloon project is actually going?
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>> a little bit. we know that initially the idea was they were going to try to use it as a fabric for wifi specifically and discovered that wasn't working particularly well. we've since gone on to using the lte that most of us are using on our i sfones and and roids. that seems to be working a little better. beyond that there's not too much we've heard. the testing obviously is continuing but there's nothing anywhere near rollout. >> facebook is also trying to provide internet everywhere. who wins, google or facebook or someone else? >> i'm not sure what we're winning exactly here other than we're causing facebook and google to spend an inordinate amount of money. but my guess is google is probably in a better position to do this. i think the bigger question going forward is what is all of this in service ouf?
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is it in service to bringing connectivity or something else that's going on here that's maybe more interesting, data collection. and again i think google is in better position to benefit. >> coming up, every growing tech company makes mistakes along the way. so how should they address the issue to avoid disaster?
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>> welcome back to the best of bloomberg west. when pay pal cofounder spoke, the decision to use
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humor seems to have had the right effect but not all tech executives get it right and sometimes the wrong response can lead to a nightmare. how should executives address vulnerability? i talked to about it with the former ceo of live ops. i asked him if he thought the response was the right response. >> it appears to be since it was -- >> i laughed. mediated unny and the situation so then it didn't get run out of control. >> at the same time he was talking about mismanagement of twitter. in retrospect, has sort of back peddled saying management has gotten better but that's got to rattle a ceo. you know, what's going on in -- at twitter in his mind? >> i don't know.
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what's going on at twitter and i'm probably the wrong person. i tend to try to obble comment on thing that is i have inside information ob. >> in general when someone criticizes your leartship whether it's your leadership. >> well, someone is always criticizing you. you've got to find out just one voice in the wilderness or it's a trend. if it's a trend, you need to actually be able to address it and respond to it and listen to it. sometimes you need to listen to it and modify behavior, sometimes you need to listen to it and explain bare and i need to know. and stime you need to ignore it. >> one situation, the ceo of snap chat. some e-mails were published that were very derogatory towards women. he apologized saying i'm obviously horrified.
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>> oh, my goodness i think he did a beautiful job of owning up to some bad behavior that was public and that there is no excuse for. compartmentalizing it and making sure it was tied to a time in his life that he didn't have quite the maturity he has now and trying to separate that from where he is now and how he behaves now is really good. >> san apology enough? >> i think it is not always enough. you have to have good behavior. so ray has apologized. not enough. >> i don't know if he could ever apologize enough. >> i think >> as a human being. >> oh, my goodness, the whole thing. it's not just the n.f.l. there's no way women should ever get abused at any time and that happens over and over again. so we have to fix that in society.
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so maybe the only good thing is way more attention to this so with try to eradicate it. >> what do you make of roger's response? has he been apologetic enough? >> i don't even know if the apologies are enough. we need to see change in the n.f.l. and have the behavior get fixed. and the fact that there's controversy over whether he saw tapes or not or the n.f.l. knew, i think there's a taint over everything how truthful is everybody in this whole thing. and how well managed is it oing to be to just have it glossed over instead of fixed. i think any time you try to gloss over something and hope it goes away, most people see through that very eesly. >> so you think the best strategy is to comment? because in some cases companies will choose to not comment at all. >> i think it depends like many
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things it depends on what the situation is. sometimes you can't comment. so you may be in a quiet period and somebody says something about your financials and you're not able to say anything. and the noise builds and you feel very helpless but you're not allowed to do smk. so there's all kinds of times that not commenting is appropriate. i think it's judgment you have to you'd on what is the situation? is it better to tell the truth. which i think is always better. how much explaining do i need to do? hoy vulnerable should i be? i think people give a lot of credit to people like evan who showed that he was pretty -- wasn't evolved very well as a young man in college and he owned up to that and said he apologized and deeply regretted it and hopefully they give him a hall pass to give him a
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chance to prove that he is a much better man. >> that does it for this edition. you can catch us monday through friday 1:00 p.m. and 6:00 p.m. eastern time. 10:00 and 3:00 pacific. we'll see you next week.
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